The newly re-elected CEO of Austrade, Peter O’Byrne, offers his view of Australia’s history of trade, and where it’s headed in the future
At the end of the 19th century, wool represented a staggering 40 percent of Australia’s exports. At the time of the first Australian export awards in 1963, our trade strengths still linked to our natural resources and agricultural wealth. Australia rode the sheep’s back, the wheat belt, and prospered from mineral riches.
It was perhaps a surprise, then, that the first Australian Exporter of the Year—Henselite, a bowling ball company from Melbourne—came from the manufacturing sector. The company boasted their products "were exported to more countries than Australian wool". While the statement demonstrated the prominence of wool to Australia’s then export culture, the win itself provided a clue to how our business and export strengths would evolve over the ensuing decades.
The Australian Export Awards are now in their 45th year, and Australia, and the Australian business community, has continued to diversify along with global change.
Australia now has eight Nobel Prize laureates in medical sciences and a string of world-beating biotechnology innovations such as anti-viral drug Relenza and cervical cancer vaccine Gardisal. We can now claim global prominence in a range of sectors from ICT and nanotechnology, to environmental management and avionics. Australian technology is guiding NASA satellites, students from Lima to Dubai are benefiting from Australian education solutions, and our wine is tantalising palettes across the world.
Many of our new and innovative export industries have evolved from traditional strengths.
One excellent example is Australian mining. As the third largest mineral producer in the world, mineral exports have contributed well over $500 billion to Australia’s wealth during the past two decades. The level of resulting expertise means Australian mining services companies can play a role in helping to maximise safety, efficiency, and profitability in mine sites all over the world. Sixty percent of the world’s mines use Australian designed and produced software. ABARE predicts mining technology, equipment, and services exports are capable of reaching $6 billion by the end of this decade.
One software supplier leading the way is MINEMAN Systems from Melbourne. MINEMAN recently secured a 10-year contract with India’s Sterlite Industries, who own and operate the largest copper smelting and refining operation in India. MINEMAN Systems’ new technology is enhancing Sterlite’s smelter operations by supplying software that controls planning and scheduling, workflow automation, financial management, and strategic analysis. The software, controlled through a data centre near Mumbai, also allows Sterlite staff to manage smelter operations remotely.
Similarly, Australia’s highly efficient farmers have created a diverse agribusiness sector that is also a world-beating innovator. Australian companies have developed state-of-the-art products including irrigation systems, wine and viticulture technology, livestock genetics, farm management techniques and advanced quality control systems.
Australian Elite Genetics, from Table Top in regional NSW, sell genetics for Australian Friesian Sahiwal (AFS) cattle, a dairy breed originally developed for the tropical climate of North Queensland. The company has been working in Mexico since 1996, assisting local farmers in establishing dairy farms in tropical regions such as Vera Cruz and Campeche. More than 6,000 head of cattle in Mexico’s tropical regions are now derived from AFS genetics. Australian Elite Genetics has also found customers in countries such as Malaysia and the Philippines.
With growing strength across the Australian business community, and our booming resources sector enjoying unparalleled terms of trade, exports reached new heights in 2006, to the value of $210 billion, up 16 percent on the previous year’s record of $176.7 billion.
Importantly, manufacturing exports grew 14 percent to $42.1 billion, another all time high. Services exports also expanded by 8 percent to $43.8 billion, yet another record. And despite the drought, regional exporters managed to achieve 6 percent growth.
Recent Australian Export Awards winners offer a snapshot of the innovation of exporting businesses.
2006 Australian Exporter of the Year, ResMed, is at the vanguard of Australia’s advanced manufacturing sector. ResMed provides treatment solutions to sufferers of sleep-disordered breathing (SDB), a debilitating medical condition affecting up to 20 percent of the adult population. SDB is associated with serious health conditions such as high blood pressure, heart disease, stroke, diabetes, and depression. Exporting to some 60 countries, ResMed achieved revenues of US$607 million in 2005–06, and employed 2,500 people.
Another example of diversity in Australian exports is 2005 DHL Australian Exporter of the Year, the Wiggles. Matching creativity with smart strategies to create a sophisticated international entertainment phenomenon, some 80 percent of their business is focused on exports. The Wiggles now have Chinese-speaking and Spanish-speaking casts, to further grow their presence in China and in Latin America.
The very concept of international trade is itself rapidly evolving, with ideas of what it means to engage in international business reflecting more sophisticated business models. An exporter in 2007 might be engaging with global supply chains, selling intellectual property, establishing a joint venture, selling a master franchising agreement for several countries, or investing offshore.
Australian Cultural Diversity
Australia is also now one of the most culturally diverse countries in our region. Three million Australians speak a language other than English at home, and some 400,000 Australians have Mandarin or Cantonese as their first language. With the benefits of closer interaction with people from all corners of the globe, Australians now enjoy varied and sophisticated influences in their lifestyles, food, work, and business.
More Australian companies than ever are adapting their business strategies to meet shifts in the global trading environment, to maintain competitive advantage, looking to overseas markets to launch a new ‘born global’ enterprise—or, sometimes, taking their product or service beyond the domestic market in order to simply stay in business.
Australia’s top 100 global enterprises are now so integrated with world markets that most of their earnings, worth more than $180 billion, come from offshore.
Change within the Australian export community is also driven by international opportunity and growth surges in our priority markets, and the big story of the 21st century has been the reawakening of the Pacific Rim economies and sleeping Asian giants.
In 1960–61, the UK was our top export destination, with Japan second. The US was third, followed by New Zealand. In 2006, Australia’s top merchandise export destinations were Japan, China, South Korea, and the US. Of the total growth in the world economy this century, the US has contributed about 12 percent, while China has contributed 32 percent—almost three times more—and India has contributed 9 percent.
Major trade developments and trade liberalisation has also shaped the landscape for Australian exporters, starting with the signing of the New Zealand-Australia Free Trade Agreement in the 60s. Australia now has four significant FTAs in place with the addition of Thailand, Singapore, and the US. Negotiations are underway with Japan, China, Malaysia, the nati
ons of ASEAN, and New Zealand.
In fact, more than half of world trade is now conducted under free trade agreements, with 199 FTAs (referred to as regional trade agreements by the World Trade Organisation) notified as being in force to the WTO as at December 2006. WTO president, Pascal Lamy, predicted earlier this year that the world could see 400 preferential trade agreements by 2010.
Since the 25 percent across the board cut in tariffs in the early seventies, the Australian Government has continued to introduce measures to improve competitiveness. In the 1980s significant economic reform took place with the floating of the exchange rate, deregulation of the financial markets, entry of foreign banks, further reduction of tariffs, quotas and subsidies, the restructuring of the manufacturing industry, and large-scale immigration.
The devaluation of the floated Australian dollar and the imperatives of increased international competition encouraged many manufacturers to take the first steps into export markets.
One excellent example is Australia’s automotive sector. In 1980, an export dimension to Australia’s automotive manufacturing output barely existed. In 2006, automotive exports were Australia's sixth largest export, and around 40 percent of Australian-made passenger motor vehicles were exported, compared with less than 5 percent in the late 1980s. The Australian-made Camry is now the taxi of choice in Dubai, and it is estimated that one in five cars sold in the Middle East overall is Australian made. And the exports go beyond cars themselves; international sales of aftermarket equipment are worth more than $200 million each year.
Since the 80s, a new breed of exporter, the ‘born global’ enterprise, also began to evolve. These companies often produced highly specialised products or services that needed to reach global markets from day one.
In the 2006 BRW Fast 100 list, a snapshot of Australia’s fastest-growing SMEs, more than half of the companies reported they had a global strategy, and a quarter already had operations outside Australia.
Services came to the fore in the 1990s. Australia’s rising productivity, high skill levels and overall capacity to provide practical solutions in a professional manner all contributed to a strong services sector. These skills were on display to the world during the Sydney Olympics (after all, the hosting of an event like the Olympics was all about services – logistics, transport and hospitality, as well as showcasing Sydney as a world class setting). Australia’s commitment to developing tourism in the 1980s and 1990s has also paid off.
Tourism is now worth $19.1 billion to the Australian economy. The Tourism Forecasting Committee expects the total economic value of inbound tourism will grow in real terms at an average annual rate of 7.1 percent to reach $35.6 billion by 2015. By that time Australia will be welcoming more than a million Chinese and 200,000 Indian visitors each year.
Another notable feature of our international trade development is the role women are playing in Australia’s export culture. Many women run small businesses—one-third of Australia’s 1.6 million SMEs—with most of the growth in the export community predicted to come from small businesses in emerging industries.
The Global Anholt-GMI Brands Index named Australia the best nation brand on earth in 2005. While the research showed there were some areas where international perceptions do not match our strengths, a powerful and positive nation brand is continually being taken to the world. This has a direct influence on our trade in most export sectors – including Australian wine.
As recently as 1981, imports of wine to Australia exceeded exports. In only a quarter of a century we have become the seventh largest wine-producing nation in the world, and the fourth largest exporter of wine. In 2005-06, our wine exports reached 722 million litres worth $2.75 billion. Within five years, the AWBC predicts this will rise to more than $4 billion. Our wine exports have benefited from Australia’s image as a clean and green nation, and our increasing reputation for sophistication and good living.
Australia is now in a fortunate position. We have our traditional strengths and the terms of trade are now in our favour. We have shown ourselves to be good at innovation and have developed well in manufacturing and in the services sector. And we have some robust pillars to rely on in a strong domestic economy with sound fundamentals, solid corporate governance, and strong economic policy institutions. Australia also has a good fighting spirit in the face of adversity, as has been shown during the Asian financial crisis and in more recent economic events. The bush is fighting back from drought, manufacturing has absorbed the changes in protection, and our services sector is going from strength to strength.
International trade—and access to global markets—is a vital determining factor underpinning Australia’s future economic prosperity. As chief executive of Austrade, I am lucky to meet exporters from all parts of the nation, and I am constantly heartened everywhere I go by high levels of business excellence and an increasing willingness to take on the challenges of the global market.
In 2005–06, Austrade connected international buyers to more than 5,000 Australian service providers and suppliers, generating more than $18 billion in business deals.
If you are considering exporting, I encourage you to make the most of the range of services Austrade can offer business at all stages of the export journey, including free services under the New Exporter Development Program. Austrade also administers the Australian Government’s Export Market Development Grants scheme, the principal financial assistance program for aspiring and current exporters.
With more than 1,000 staff actively working in almost every market of the world, Austrade can help make international trade easier.
* Peter O’Byrne is CEO of Austrade. For more information visit www.austrade.gov.au or call 132 878.